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| Kathmandu, Friday March 28, 2003 Chaitra 14, 2059. |
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NRB to provide Rs 100m to tea sector
By Milan Mani Sharma
KATHMANDU, March 27 : Nepal Rastra Bank (NRB) has agreed to
provide a long-term credit of Rs 100 million to Agriculture Development Bank (ADB/N) to
resume its tea sector lending this year.
"The central bank has already given a
verbal consent to this effect," said an NRB source, adding that its formal
announcement would be made shortly.
The green signal for resuming lending in the
sector has come under the NRB’s new policy of supporting high valued crops including
tea and cardamom among others.
The new investment in the sector had stopped
since over a year after the new NRB Act reduced the refinance loan’s reimbursement
period to six months. Earlier, such grace period ranged from five to seven years.
Farmers obtaining return only after five
years of plantation are not expected to pay back the loans within the stipulated time, the
ADB/N, the sole investor in the sector had argued while pulling out from the sector.
It had been requesting the central bank
either to relax the provision or arrange alternatives, as demand for loans was constantly
mounting. Considering the massive impact seen on the sector, the NRB has finally consented
on providing alternative source for lending rather than reviewing the refinance provision.
"The central bank will soon constitute a
long-term credit fund from its profit to ensure regular release of amount in the sector
from the next year," he added. It announced of setting up Rural Self-Help Fund (RSHF)
to support cash crops in the new monetary policy as well.
The fund - to be constituted soon - will be
developed as a permanent source for providing long-term credit at low interest rates to
financial institutions, the source added. The NRB has announced of ceding 5 per cent of
its annual profit in the fund to make it sustainable.
"Apart from the initial amount, the
central bank will be issuing loans for tea sector from this fund for next five
years," he informed. However, the amount of loans to be released from next year is
yet to be finalised.
While the NRB officials informed that the
current mindset of the central bank is to provide Rs 20 million annually from next year,
the ADB/N officials argued that the amount would be far less to support the initial
investment.
"We have requested the NRB to provide a
total of Rs 550 million in four years if the recovery of the first investment of Rs 100
million is to be ensured," said Pramod Paudel, chief of Credit Department, ADB/N.
Going by its investment pattern, designed as
per the nature of plantation, the ADB/N has been releasing 40 per cent of approved loans
in the initial year and 15 per cent, 20 per cent, 15 per cent and 10 per cent in
subsequent installments for next four years respectively.
The demand of the loans in tea sector,
designated as a priority sector owing to its return, and employment potential, had been
constantly on the rise prior to the ADB/N pulled out from the sector. "Even when we
stopped processing loan application in mid-January, 2002, loans demand was already over Rs
77.5," said Arjun Thapa, Section Chief, Credit Department of ADB/N.
The bank had invested a total of Rs 190
million in the last fiscal year and had projected to lend Rs 250 million this fiscal year.
Moreover, the stoppage hit the expansion programmes and the government’s efforts to
promote tea farming at commercial level.
The ADB/N’s total investment and recovery in the sector
is Rs 820 million and Rs 515 million respectively. Currently, there are 2032 small tea
growers, 58 registered companies and 22 factories in the country.
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